United Versus Singapore Airlines: The Race For Non-Stop USA-Singapore Connections

| About: United Continental (UAL)

United Airlines (NYSE:UAL) has stolen a march on Singapore Airlines (OTCPK:SINGY) when it announced its launch of a non-stop service between San Francisco and Singapore beginning June 1st, on board the Boeing 787-9 Dreamliner. This will be the first non-stop service between Singapore and the United States after SIA terminated its services to Los Angeles and Newark in 2013. United's announcement came soon after SIA made known its plans to resume non-stop services in 2018, using the Airbus A350-900 ULR (Ultra long-range) aircraft.

One may wonder why United has moved so quickly to fill the void left by SIA when the poor loads experienced by the latter contributed to its suspension of the non-stop services. Apparently the passenger traffic between the two markets has since improved and is growing by an average of 4% annually. Of course, this is good news for Singapore Changi Airport, which is hoping that United could potentially bring more tourists to Singapore. Understandably, it does not matter which airline brings in the load. And since it is believed that capacity will help grow the traffic, then United has made the right move while SIA waits. The business climate changes so fast that the right time is as good as anyone's guess.

For SIA, it is an opportunity cost. Or, an opportunity lost. When it terminated its non-stop services to Newark, regional rival Cathay Pacific moved in quickly to fill up the void, flying non-stop not only 4 times daily between Hong Kong and New York John F. Kennedy, but also daily to Newark. That also pits Hong Kong International Airport, which is only some four hours away from Changi, as an Asian gateway for onward connections. It also provides opportunities for Middle Eastern airlines, notably Emirates, Qatar Airways and Etihad Airways, to better compete to carry more traffic through their Gulf hubs as they expand their connections within Asia and services direct to the US.

Changi's euphoria over United's decision is understandable, since connections are key to hub operations. With a non-stop link between Singapore and San Francisco, it will mean more regional traffic feeding into Changi to take advantage of the trans-Pacific connection and the support of United's extensive network within the US. United's vice-president of Atlantic and Pacific sales Marcel Fuchs said: "Those arriving in San Francisco will have dozens of options to connect to other cities across the Americas." Changi Airport Group senior vice-president (SVP) for market development Lim Ching Kiat echoed the same sentiment, adding that it will strengthen Changi's position as the preferred gateway between Southeast Asia and North America.

Image Courtesy of Ryan Johnson

Image Courtesy of Ryan Johnson

United's domestic network may be its edge over SIA when the time comes for the latter to mount its planned non-stop services. But SIA can always rely on its partnership links with US carriers such as JetBlue (NASDAQ:JBLU), not excluding too United, which is a Star Alliance partner. And SIA has always competed on the strength of its superior service. For the long haul, especially for one that flies such a great distance, it is an important customer consideration.

United's non-stop flight from San Francisco to Singapore is an estimated 16-hour-20-minute journey. At 8,446 miles, it is the longest Boeing 787 Dreamliner route ever flown, displacing the carrier's own Los Angeles-Melbourne service, also operated by the -9 stretch variant. Singapore's erstwhile non-stop flight in the same direction but from Los Angeles to Singapore clocked 17 hours 30 minutes, and from New York Newark non-stop to Singapore, 18 hours or longer. In the past, SIA was operating the Airbus A340-500 but will be converting seven of 63 A350-900s on order to the A350-900 ULR variant for the resumed services - the reason for the delayed plan. Referring to the new variant aircraft at the time of its announcement to resume the services, SIA chief executive Goh Choon Phong said: "We are pleased that Airbus was able to offer the right aircraft to do so in a commercially viable manner."

Perhaps too, little did SIA suspect that United would spring ahead to operate its service using the Dreamliner. The Boeing 787 could possibly be the most comfortable aircraft by far to travel the ultra-long distance, designed to limit jet lag. Among the reasons cited: the 787 has a better air filtration system and more humidity than comparable planes, so passengers are less likely to land with chapped lips or dried skin and nasal passages; the windows are larger so the cabin looks brighter and roomier; and the ride is promised to be smoother and quieter. United's vice-president Ron Baur said: "Our passengers will arrive less fatigued, and most experience a significant reduction in jet lag."

The industry will have to wait to see what SIA has up its sleeves. There may be surprises yet. SIA's previous services were configured as an all-business-class flight, and while the target market is still very much corporate and business travellers, SIA is not revealing details about how many seats the new business class cabin will have. However, weight limitations are likely to suggest more leg room, if not fewer seats.

High fuel costs were a major reason why SIA suspended its previous non-stop operations. Fortunately for United, today's low oil price favours its early move and affords the American carrier precious lead time to consolidate its market. Come June, it will steal the record of world's longest non-stop commercial flight from Qantas, whose service between Dallas-Fort Worth and Sydney takes just under 17 hours over a distance of 7,454 miles. SIA will have the honour when it resumes its 19-hour Singapore-New York (Newark) flight, covering 9,536 miles. Until then, the game belongs to United.

Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.

About this article:

Want to share your opinion on this article? Add a comment.
Disagree with this article? .
To report a factual error in this article, click here